Class I milk price sets record

Columnist Lee Mielke rounds up the week's dairy news.

By Lee Mielke

For the Capital Press

Published on February 21, 2014 11:25AM

Lee Mielke

The Agriculture Department’s preliminary data shows January milk production in the top 23 producing states totaled 16.1 billion pounds, up 1 percent from January 2013. The 50-state total, at 17.26 billion pounds, was up 0.9 percent from a year ago.

Revisions reduced the original December estimate by 19 million pounds, to 15.7 billion pounds, down 0.3 percent from December 2012. That put 2013 annual production in the U.S. at 201 billion pounds, up 0.3 percent from 2012. Revisions to 2012 output increased the total 213 million pounds and revised 2013 output was up 32 million pounds from last month’s report.

January cow numbers in the 23 states totaled 8.51 million head, up 6,000 head from December and 7,000 more than January 2013. The 50-state total showed a decrease of 13,000 head from a year ago. Output per cow in the 23 states averaged 1,891 pounds, up 17 pounds from a year ago, up 19 in the 50 states.

Production by state

Checking the top states, California’s January production was up 4.7 percent from a year ago, thanks to a nice 90-pound increase per cow and 1,000 more cows. California will be the state to watch in coming months as to the effects of the severe drought there. Wisconsin was down 2.9 percent, as the cold weather took its toll, dropping per cow production by 55 pounds. Cow numbers were unchanged. New York was up 0.3 percent, despite a 10-pound drop per cow. Cow numbers were up 5,000 head.

Idaho was up 0.4 percent, on a 55-pound gain per cow, though cow numbers were down 14,000. Pennsylvania was up 0.4 percent, thanks to a 20-pound gain per cow but cow numbers were off 4,000 head, and Minnesota was down 2.1 percent, again with weather reducing output per cow by 20 pounds. Cow numbers were down 5,000.

The biggest decline was in Illinois, down 4.8 percent, followed by Missouri, down 4.4 percent, and then Wisconsin. The biggest increase was in Colorado, up 5.8 percent, followed by Kansas at 5.3 percent, and then California.

Other states of interest include Arizona, up 0.8 percent on 2,000 more cows. Output per cow was off 5 pounds. Michigan was up 1.3 percent, thanks to a 10-pound gain per cow and 3,000 more cows. New Mexico was off 0.9 percent, due to a 40-pound loss per cow. Cow numbers were up 3,000. Texas was up 3.3 percent on a 40-pound gain per cow and 5,000 more cows. Washington was up 1.7 percent on a 10-pound gain per cow and 3,000 more cows.

FC Stone dairy broker Dave Kurzawski said the report is “neutral to slightly bearish versus pre-report expectations, but the 1 percent increase is not enough to meet up with the kind of demand we’ve had. Spring flush could have a bigger impact on market sentiment later this spring, but not now,” he said.

USDA’s Livestock Slaughter report estimated 270,200 culled dairy cows were slaughtered under federal inspection in January, up 13,500 from December 2013, but 26,700 less than January 2013.

Media watch

Watch for the major media to all of a sudden taken an interest in milk prices. USDA announced the March Federal order Class I base price at a record high $23.64 per hundredweight, up $1.62 from February, a whopping $5.84 above March 2013, and equates to about $2.03 per gallon. It is the price that all federal orders use to determine the order’s Class I milk price after adding local Class I differentials and will surely result in higher prices at the grocery store but we won’t see the media attention when the prices fall as we know they will. The First Quarter Class I average stands at $22.38 per cwt., up from $18.33 at this time a year ago, $17.38 in 2012, and $16.44 in 2011.

Cash traders were busy analyzing the latest Milk Production and Slaughter reports and anticipating the afternoon’s January Cold Storage report Friday morning, Feb. 21. Cash cheese prices reversed two weeks of losses. The blocks closed the President’s Day Holiday-shortened week at $2.1625 per pound, up 5 3/4-cents on the week and 53 1/2-cents above a year ago. The barrels closed at $2.1575,up 9 1/2-cents on the week and 52 3/4-cents above a year ago. Only two cars of block traded hands on the week and eight of barrel. The NDPSR-surveyed block price hit $2.3216 per pound, up 4.4 cents. Barrel averaged $2.3244, up 2.3 cents.

Butter closed Friday at $1.7850, up 1 1/2-cents on the week and 19 1/2-cents above a year ago. Seventeen carloads were sold on the week. NDPSR butter averaged $1.8595, up 2.2 cents.

The Agriculture Department’s latest Livestock, Dairy and Poultry Outlook predicts that milk supplies will increase in 2014 as a modest herd expansion is forecast for the second half of the year. Yield per cow was forecast to rise year-over-year, but no change was made in the February forecast from January. Exports remain strong, but higher milk production, both domestically and globally, could pressure prices later in 2014, according to the Outlook.

Similarly, a higher export forecast for soybean meal supports the advance in prices from January to $425-$465 per ton. The outlook for forages appears steady, as January preliminary alfalfa prices are reported in January Agricultural Prices at $185 a ton, down from $187 in December and well below the January 2013 price. 2014 feed prices should be lower than last year, says USDA.

The February dairy cow forecast was raised fractionally from January to 9.26 million head. Sharply higher year-over-year springer prices, combined with flat heifer calf prices, suggest some short-term herd expansion, though there may be caution on the part of producers toward a longer term expansion. USDA predicts the expected feed and milk prices will push the calculated milk-feed price ratio to the highest in several years. Milk yield was unchanged from January at 22,230 pounds per cow. However, year over-year, milk yield is expected to increase by 1.9 percent from 2013.

The Outlook also showed increased projections for 2014 Class III and Class IV milk prices from last month’s report. The First Quarter Class III price was pegged at $21.30 per hundredweight, up from the $19.75 expected a month ago. The Second Quarter Class III is $19.25 per cwt., up from $18.20. The year’s average, at $18.70, was up 50 cents from last month’s projection, and compares to $17.99 per cwt. in 2013 and $17.44 in 2012.

The First Quarter Class IV milk price was pegged at $22.30 per cwt., up from $21.75 a month ago. Second Quarter Class IV is $20.95 per cwt., up from $20.80. But, the year’s average, at $20.20, is down a nickel from last month’s Outlook, and compares to $19.05 per cwt. in 2013 and $16.01 in 2012.

USDA’s Foreign Agricultural Service reports butter and milkfat exports in December totaled 22.6 million pounds, up 182 percent from a year ago. Cumulative 2013 U.S. exports totaled 202.7 million pounds, up 89 percent from 2012. U.S. butter quota imports were down 61.5 percent from a year ago for December to 1.25 million pounds. Cumulative U.S quota imports totaled 10.88 million pounds, down 20.6 percent from 2012.

This week’s Global Dairy Trade auction saw the weighted average for all products slip 1.2 percent from the Feb. 4 event, led by a 5.4 percent drop in milk protein concentrate and a 4.5 percent drop in anhydrous milkfat. Butter was down 3.8 percent, Cheddar cheese was off 1.7 percent, Skim milk powder was off 0.1 percent, and whole milk powder was down 0.3 percent. The only gain today was in buttermilk powder, up 3.1 percent. All of the commodity prices are at historically high levels despite the downturn from the last auction.

The average butter price equated to about $2.0802 per pound U.S., down from $2.1523 in the Feb. 4 event ($2.0294/lb. on 80 percent, down from $2.0998). The Cheddar average was $2.1977 per pound, down from $2.2385.; skim milk powder, $2.1682, up from $2.1527 per pound, and the whole milk powder average was $2.2675, down from $2.2702 in the last event.

CWT approves exports

Cooperatives Working Together accepted 21 requests for export assistance this week to sell 4.149 million pounds of Cheddar, Gouda and Monterey Jack cheese, and 848,780 pounds of 82% butter to customers in Asia, Central America, Europe, the Middle East and North Africa.

The product will be delivered through April and raised CWT’s 2014 cheese export sales to 20.54 million pounds of cheese, 6.24 million pounds of butter and 698,865 pounds of whole milk powder to 18 countries on four continents. These sales are the equivalent of 330.3 million pounds of milk on a milkfat basis.

Milk production is moving higher across most of the nation despite adverse weather, according to USDA’s weekly update. Cooperatives in California report increases resulting from dairy farmers managing dairy rations and keeping dairy cows in the milking string longer than usual. Dairy producers in the East expect a falloff in milk volumes as snow and ice storms affect cow comfort.

Washington court battle

Court challenges to a dairy farm expansion in Wisconsin have been making the news lately but an ongoing court battle regarding dairy operations in Washington state could have huge ramifications for dairy producers across the U.S.

Jay Gordon, executive director of the Washington State Dairy Federation, said the case originated with the Environmental Protection Agency, not the litigation but an issue involving the Safe Drinking Water Act that collectively challenged four dairy operations in the Yakima Valley.

The situation was resolved with the EPA about a year ago, according to Gordon, but then a group of environmental attorneys representing environmental groups filed suit under the Federal Resource Conservation and Recovery Act.

Gordon said there have been other cases filed against various livestock producers and farmers in the U.S., going back to the late ’90s in North Carolina, Oklahoma and Texas, but this is in the 9th U.S. Circuit Court of Appeals, which “generally tends to lean a little more liberally.” The concern is, “Does the RCRA apply to farmers,” and the court recently expanded the case to include pharmaceuticals, phosphorus and hard metals, not just nitrates.

The case will be heard against the three remaining families, four dairy operations, as one of the original operators has settled and exited the dairy business because of this challenge, Gordon said. The trial will be held in September and the court is being asked to rule, for the first time in the United States if a dairy farm is subject to the RCRA laws.

Those laws typically regulate dumps, landfills and materials that would be discarded, according to Gordon, and what the environmentalists are asking is for the court to rule that farmers are “effectively dumping nitrates when we’re growing crops, fertilizing, if we have any pharmaceuticals in our manure that show up in groundwater, that constitutes dumping under federal law.”

“The ruling will set precedent across the country,” Gordon warned, “that if you have fertilizer in your corn field, manure in your corn field, it doesn’t really matter, and you get a big rainstorm and it washes that fertilizer down below the root zone, the environmentalists charge that makes you a dump under federal law and you can be enforced against by EPA or sued by attorneys.” There is more information posted as well as links to other sites detailing this case at www.wadairyfederation.org.